- 1. AfDBs 2011 Annual Meetings AfDB EMRC SME Forum :Bridging the
Missing Middle Gap in AfricaSession on Innovative Solutions to
Address the Financial needs of SMEsN K Maini Deputy Managing
DirectorSmall Industries Development Bank of IndiaJune
06,20111
2. Indian MSME Sector An OverviewContribution to Economic
Growth, Poverty Reduction, Employment Creation: No. of MSMEs 30
mio, 95% MEs; 2nd largest source of employment - 70 mio;
Contributes 45% of industrial output and50% of exports;Outsourcing,
linkages with large units/ MNCs increasing vertical
integration.Paradigm shift fromprotectionto enabling, economic -
enterprise growth to sustainable -inclusive growth. 2 3. Role of
SIDBI The Development BankBackground Under an Act of Parliament -
April 1990; Promotion, financing and developmentofMSMEs and
co-ordinate the functions ofinstitutions serving the sector;
Presence: >600 MSME clusters through 103 branches; indirect
support to network of >84,000 branches of banks/ FIs/ MFIs;
Cumulative financial support of US$ 45billion to 32 million MSMEs.3
4. SIDBI One Stop Solution for MSME sectorEntrepreneurship /SVCL-
Venture CapitalEnterprise promotion SMERA- creditImprove flow of
Credit to MSMEsCredit deliveryrating- green rating modelsCGTMSE
credit guarantee- RSFStructuredRefinance Business
productsDevelopmentServicesISTSL-technologyDirect
Credittransfer-pCDM - Risk Micro Missing Middle 4
CapitalFinanceDownscaling / ISARC Asset- Nurturingupscaling4 4-
Sustainable reconstructionMFIs Finance 5. Indian MSME -
SegmentsLoans upto MFIsNo paper work, social collateral,US$
1100/-Loans from Lack of information,considered risky, small US$
1100/- to Missing Middleticket size, high transaction cost.US$
22,000Availability of Info,Loans aboveFormal FIsreasonable ticket
size and manageableUS$ 22,000transaction costs, well banked 6.
Financial Inclusion Micro Finance by SIDBI Thrust on unserved,
underserved, rural andunorganised sectors serving
Nationalpriorities and MDGs; Through Micro Finance (loans upto
US$1100); Nurtured 150 plus MFIs for on-lending; Pioneered the
concept of rating of MFIs; Mainstreaming - Commercial Banks
nowfunding MFIs; Cumulative Beneficiaries >30 mio persons. 7.
Propagating Responsible Micro Finance Promoting transparency and
reductionin Interest rates; Created Lenders Forum to
promoteco-operation among MFI lenders; India Microfinance Platform;
Code of Conduct Assessment Tool; Credit Bureau to avoid multiple
lending; Encouraginginformation sharingamongst MFIs. 8. Beyond
Micro Finance: Missing Middle Approach In India, about 20% of
credit demand ofmicro enterprises met by formal
financialinstitutions; Of the total bank loan, only 25% are
forloans up to US$ 22,000 a vast sectormissing out on credit
availability; Thus, SIDBI thrust now on this MissingMiddle segment
from US$ 1100 to US$22,000. 9. Why Micro Enterprises ? Meet
development agenda. Highincremental employment creation; Creating
larger SME clients for thefuture; Foothold in a segment that can
betargeted by banks/ MFIs in thefuture-mainstreaming.9 10.
Approaches to MEL Co-branding NBFCs BMOs (Industry Associations)
Banking Correspondent model Buying out the portfolios Direct MEL 10
11. Test Launch Direct MELs In FY2009, SIDBI started MELs: Loans
for working capital and/ orequipment Credit Guarantee coverage
borne bySIDBI Test launch through 7 MFBs Avg. interest of 12% p.a.
Avg. loan of US$ 4000 500 MELs covered 11 12. Direct MEL Lessons
Learnt Absence of formal financial information; Need to bring in
simplified process andassessment techniques; Largenumbers need
highstandardisation; Our rate very attractive to client; Need for
intensive follow up/ monitoring(outsourcing ?); Capacitybuilding
needsofintermediaries/ clients. 12 13. Direct MEL Future Outlook !
Draw from international practices inMELs e.g., downscaling; Design
a scalable model covering entirecredit cycle; A separate integrated
software userfriendly, can be shared with otherlenders; Simplified
process and tools to assessthe loan against borrowers cash flows;
Expert credit rating model initially statistical model once a pool
of MELs isavailable. 13 14. Missing Middle - Partners ADB : LoC of
US$ 50 mio & TA of US$ 3 mio to develop, access to finance and
businessdevelopment services by micro enterprises. TA is women
centric for supporting micro-entrepreneurship forwomen empowerment
in selected states and capacity building of the staff of MFIs,
tosensitize them towards the specific needsand opportunities of the
sector. GIZ, Germany : To provide capacity buildingsupport towards
cluster centric approach forMEL 15. Contact DetailsNavin Kumar
MainiDeputy Managing DirectorSmall Industries Development Bank of
India,Head Office, SIDBI Tower,15, Ashok Marg,Lucknow 226001,
IndiaTel.: +91-522-2288508Fax: +91-522-2286925Mob.: +91-99190
02367E-mail : [email protected]: www.sidbi.in 15 WE EMPOWER
MSMEs
